IMF warns Nigeria not to delay reforms over high oil prices

The International Monetary Fund (IMF) has warned Nigeria and other oil exporting nations in dire need of structural reforms not to be tempted to delay the exercise due to the current higher oil prices.

This is just as the IMF has predicted that inflation rate in Nigeria will rise to 13.5 per cent in 2019.

The Counsellor and Director of the Research Department, IMF, Maurice Obstfeld, said these yesterday during the unveiling of the IMF’s World Economic Outlook (WEO), at the ongoing annual meetings of the IMF-World Bank in Bali, Indonesia.

The fund reiterated the need for Nigeria to enhance its non-oil revenue mobilisation.

Oil prices has been on the upswing in the past few weeks as more evidence emerged that crude exports from Iran, OPEC’s third-largest producer, are declining in the run-up to the re-imposition of United States sanctions and as a hurricane moved across the Gulf of Mexico. Precisely, Brent crude closed at $84.17 a barrel yesterday.

But Obstfeld, who briefed the media stressed that strengthening of fiscal positions was necessary to reduce debt vulnerabilities in Nigeria and other countries.

“The focus should be on growth-friendly fiscal adjustment, with a shift in spending toward productive and social outlays accompanied by frontloaded domestic revenue mobilisation, through for example, broadening the tax base and strengthening revenue administration.

“Moreover, enhancing financial resilience through proactive banking supervision, ensuring adequate provisioning for losses by banks, and improving resolution frameworks to keep expensive public bailouts at bay can help foster a financial system supportive of growth.”

Furthermore, the IMF director noted that improving education standards would be essential to ensuring that the growing pool of workers have the necessary skills, adding that achieving robust growth would also require enhancing the macroeconomic resilience of low-income countries, including against climate change.

“Stronger buffers and sound macroeconomic policy frameworks, alongside policies and institutions that make it easier for labour and capital to move across economic sectors and geographic regions, are essential to that end.

“To reduce adverse consequences from climate change, countries could also invest in specific adaptation strategies that reduce exposure and vulnerability to weather shocks, such as climate-smart infrastructure, the adoption of appropriate technologies and regulations, and putting in place well-targeted social safety nets that can promptly deliver support,” he added.

According to the WEO, although inequality has declined since 2000, low-income countries continued to experience significant inequality.

Meanwhile, inflation in Nigeria was estimated to fall to 12.4 percent in 2018, from 16.5 percent in 2017, has been estimated to rise to 13.5% in 2019.

“Inflation pressures in sub-Saharan Africa have broadly softened, with annual inflation projected to drop to 8.6 per cent in 2018 and 8.5 per cent in 2019, from 11 per cent in 2017.

“In Nigeria and Angola, tighter monetary policy and moderation in food price increases contributed to tapering inflation. In Nigeria, inflation is projected to fall to 12.4 percent in 2018, from 16.5 percent in 2017, and to rise to 13.5 percent in 2019. In Angola, inflation is projected to fall to 20.5 percent in 2018 from 29.8 percent in 2017 and to decline further to 15.8 percent in 2019.”

“In Angola, the region’s second largest oil exporter, real GDP is expected to shrink by 0.1 percent in 2018, following a 2.5 percent contraction in 2017, but is projected to increase by 3.1 percent in 2019, with the recovery driven by a more efficient foreign currency allocation system.”

In a related development, the IMF has also cut Nigeria’s Gross Domestic Product (GDP) growth projection this year to 1.9 per cent, down from 2.1 per cent it had estimated earlier.

“Nigeria’s growth is estimated at 1.9 per cent this year and 2.3 next year. The continent could do much better once these economies are on a more solid footing, particularly South Africa and Nigeria because they are really large and affect a number of countries in their neighbourhood.

“The aggregate growth rate for the continent is held down by the fact that the three largest economies are not performing up to their full potential,” the fund added.

The World Bank had last week cut Nigeria’s growth projection in 2018 to 1.9 per cent.

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